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9 February, 16:52

The market used to calculate the CPI is 3 units of pork and 4 unit of corn. In 2005, pork cost $20 per pound and corn cost $12 per ear. In 2006, pork cost $25 per pound and corn cost $18 per ear. What is the inflation rate for 2006 if the base year is 2005?

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  1. 9 February, 17:44
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    The answer will be 136.11

    Explanation:

    Because since the cost of the basket in 2005 is = (3x20) + (4 x 12) = 108; And the cost of basket in 2006 is = (3x25) + (4 x 18) = 147

    To calculate the CPI,

    Put a sampling of product prices from a previous year. Then, put the current prices of the same items together. Divide the current total prices by the old prices and then subtract the sum by 100.

    The Consumer Price Index (CPI) for 2006 = (147/108) x 100 = 136.11
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